India’s textiles ministry has proposed capping annual cotton exports in a bid to build a long-term reservoir of the fiber for the domestic industry, despite a large volume of cotton currently in stock. In addition, the ministry has asked that traders who go over the limit incur a 10 percent duty.
“Even if the cotton production is high this season, it is not so every year. With a ceiling put on the amount over and above which cotton can be exported, domestic cotton users will be assured of the supply situation,” an official source told Business Standard.
The Cotton Association of India estimates this year’s output of cotton to reach a record high of nearly 41 million bales and the state-run Cotton Corporation of India (CCI) has so far procured 20 percent of the total crop expected.
The Ministry of Commerce, however, which has removed all restrictions on cotton exports, disagrees. According to the ministry, cotton growers have the right to choose whether to sell their product on the domestic or international market and that curbing this would amount to a protectionist measure.
Global cotton reserves, meanwhile, are set to more than double to a record 109 million bales within four years and Indian exports are projected to drop as much as 58 percent this year. In response, the surplus has sent prices in India tumbling, which in turn could lead to smaller cotton crops planted next year and, following that, a domestic shortage.
The proposal is still under discussion between both ministries.